Commercial banks in Pokhara losing deposits

As the development banks and other financial institutions are introducing different schemes, including high interest rates, to lure clients, deposits in the commercial banks have declined, according to the bankers. "The deposit in our bank has gone down by some 30 pc recently," said a banker, "If the unhealthy competition like this continues, the problem can be even bigger." He told Republica that commercial banks have been seeing drop in deposits collections after development banks and began increasing their interest rates after the liquidity crunch hit banking sector last year. At present, banks under ´B´ category (development banks) have been attracting more deposits than the ´A´ category banks (commercial banks).

Deposit collected by commercial banks is only 49.17 percent of the total deposit collection till mid-October of the current fiscal year. Commercial banks had collected 55.88 percent of the total deposit during the same period last year. According to Nepal Rastra Bank´s Pokhara regional office, commercial banks have lost deposits by some 7 percent over the period of a year. Development banks and financial institutions, however, raised their deposits by 6 percent and 1 percent respectively during the period.

Development banks and financial institutions have been aggressively expanding their network in Pokhara in recent years. Thirteen development banks and 14 finance companies have opened their branch in Pokhara in the last one year. Only six commercial banks opened their branches in Pokhara during the period. The bankers said commercial banks have been losing deposit because of their failure to compete with development banks and financial institutions by involving in unhealthy practices like raising interest rates and offering discounts to clients in account operation and loan flow.

According to Nepal Rastra Bank, deposit collection of development banks till mid-October in the last fiscal year was 23 pc of the total deposit collection. This has climbed to 29 pc during the same period in the current fiscal year. Similarly, financial institutions have also managed to increase their deposits to 21 percent of the total deposit collection. Banks and financial institutions in Pokhara have mobilized Rs 39.04 billion in deposits till mid-October of the current fiscal year.

Source:
myrepublica